In an ever-changing real estate market, understanding the direction in which the market is heading—whether it’s cooling or warming—is critical for buyers, sellers, investors, and agents alike. One of the most powerful tools available for gauging market temperature is the Multiple Listing Service (MLS). Far from just a home-search platform, MLS data offers invaluable insights that, when analyzed effectively, can serve as an early warning system for shifts in the real estate landscape.
What Is the MLS?
The Multiple Listing Service (MLS) is a regional database that real estate professionals use to share information about properties for sale. It includes detailed data on listing prices, days on market (DOM), price reductions, pending and closed sales, and more. Because it’s updated in real-time and aggregates a large volume of localized data, the MLS is a prime source for tracking trends at both the micro and macro levels.
Key MLS Metrics to Watch
To determine whether the market is cooling (slowing down) or warming (heating up), certain MLS indicators are particularly telling:
Days on Market (DOM)
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Cooling Sign: An increase in DOM suggests homes are taking longer to sell, indicating reduced buyer urgency or demand.
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Warming Sign: A decrease in DOM points to quicker sales and possibly multiple offer situations, reflecting strong demand.
Monitoring changes in average DOM over a rolling 30- or 90-day period can help detect early signs of a market shift.
List-to-Sale Price Ratio
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Cooling Sign: A declining ratio means homes are selling for less than asking price, often signaling buyer pushback on overpricing.
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Warming Sign: An increasing or sustained high ratio (near or above 100%) suggests strong buyer competition and limited room for negotiation.
Inventory Levels (Months of Supply)
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Cooling Sign: Rising inventory indicates more properties are hitting the market without a corresponding rise in buyer activity.
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Warming Sign: Falling inventory points to a seller’s market, where demand outpaces supply.
A balanced market typically has 5 to 6 months of supply; lower suggests a hot market, higher suggests a cooling one.
Price Reductions
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Cooling Sign: A higher frequency of price cuts signals that sellers are having difficulty attracting buyers at initial asking prices.
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Warming Sign: Few price reductions indicate confident pricing and quicker absorption of inventory.
Track not just how many listings are reducing prices, but how soon after listing those reductions occur.
Pending vs. Active Listings
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Cooling Sign: Fewer homes moving from active to pending status suggest buyer hesitation or affordability constraints.
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Warming Sign: A high percentage of homes going under contract quickly signals strong buyer engagement.
This metric is particularly helpful for short-term market analysis, especially in seasonal markets.
How to Monitor These Metrics Effectively
You don’t need to be a data analyst to spot these trends. Most modern MLS systems or third-party services that access MLS data (such as Redfin, Realtor.com, or local real estate analytics tools) offer visual dashboards showing market statistics.
For those who want a more tailored approach:
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Create custom reports to track week-over-week or month-over-month changes.
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Compare year-over-year data to understand seasonal vs. structural changes.
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Segment by neighborhood or price range to capture hyper-local shifts.
Many agents use MLS’s customizable search and reporting features to provide clients with curated updates that reflect the health of specific niches—luxury homes, condos, fixer-uppers, etc.
Why It Matters
Understanding MLS trends can influence decision-making in powerful ways:
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Buyers can better time their offers and negotiate based on whether the market favors them or sellers.
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Sellers can price more competitively and adjust strategies if the market is cooling.
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Investors can identify entry or exit points based on market saturation or undersupply.
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Agents can provide clients with data-backed insights, enhancing their value and professionalism.
In volatile times—like interest rate hikes or economic uncertainty—real-time MLS insights become especially important. Markets can shift quickly, and anecdotal evidence isn’t enough. Concrete metrics provide the grounding needed to act decisively.
Caveats and Context
While MLS data is robust, it should be interpreted in context:
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Seasonality: Real estate naturally cools in winter and warms in spring/summer. Look for deviations from seasonal norms.
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External factors: Interest rates, local job markets, and housing policy changes can all skew the data.
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Data delays: Some indicators, like closed sales, reflect past conditions due to escrow timelines. Use a mix of leading (e.g., DOM, pending sales) and lagging (e.g., final sale price) indicators.
It’s also important to note that MLS coverage is regional. Trends in one market may not apply elsewhere, especially in diverse metro areas with wide economic disparities between neighborhoods.
Final Thoughts
Using MLS listings to monitor whether the market is cooling or warming gives buyers, sellers, and professionals a powerful lens through which to view real estate activity. By tracking core indicators—days on market, inventory levels, price cuts, and sale-to-list ratios—you can stay ahead of trends and make informed decisions rather than reactive ones.
In real estate, timing is everything. And the MLS, when understood and utilized properly, can be your best tool for reading the room.
Frequently Asked Questions
Are homes in my target area selling faster or slower compared to last month?
To answer this question, review the Days on Market (DOM) metric in the MLS for homes in your target area. If the average DOM has increased compared to last month, this may indicate a cooling market, meaning homes are taking longer to sell. On the other hand, if the DOM has decreased or remained the same but is still relatively low, it suggests that demand is strong, pointing to a warming market.
What’s the average number of days on market for listings similar to the one I’m considering?
You can filter MLS listings by property type, price range, and location to find similar homes and calculate the average Days on Market (DOM) for those listings. If your target home is in line with the average DOM, it suggests market conditions are stable. If the specific property you’re interested in has been on the market much longer than the average, it may indicate that there is reduced demand for homes like it, signaling a cooling market.
How often are sellers in this area dropping their prices?
Price reductions are a key indicator of market sentiment. MLS data will show you how frequently properties are undergoing price cuts in your target area. If there is a high frequency of price reductions, it’s often a sign that the market is cooling, and sellers are adjusting their expectations due to lower buyer demand. Conversely, if few homes are experiencing price reductions, it suggests that demand is high, and prices are remaining firm or even increasing, indicating a warming market.
Are homes selling at or above their asking prices right now?
The List-to-Sale Price Ratio is crucial for understanding how much homes are selling for compared to their asking price. If homes are consistently selling at or above asking price, it signals a strong market, typically seen in a warming market. If the ratio is consistently below 100% (meaning homes are selling for less than asking price), it could be an indication of a cooling market, where buyers are less willing to meet the listed prices.
Is inventory growing, indicating a shift toward a buyer’s market?
The months of supply metric tracks inventory levels and helps assess whether it’s a buyer’s or seller’s market. A growing inventory typically indicates that there is more supply than demand, which can signal a cooling market. In contrast, if inventory levels are falling and homes are getting snapped up quickly, the market is likely experiencing supply shortages, favoring sellers and indicating a warming market.
